New Sanctions May Deal Heavy Blow to Supreme Leader’s Business Empire

President Trump issued a new executive order last week that mandated sanctions on Supreme Leader Ali Khamenei, the Supreme Leader’s Office, and several categories of related entities and individuals. The president’s order points toward the imposition of sanctions on key components of Khamenei’s massive business empire that have so far escaped sanctions.

Khamenei controls at least $200 billion of assets through three foundations: the Execution of Imam Khomeini’s Order (EIKO), the Mostazafan Foundation, and the Razavi Economic Organization, the business arm of Astan Quds Razavi. These tax-exempt organizations have amassed wealth via corrupt practices such as the confiscation of dissidents’ properties. Their proceeds fund repression inside Iran and terrorism abroad.

The U.S. has never designated Mostazafan and Razavi. The Obama administration designated EIKO in 2013 but lifted those sanctions as part of the 2015 nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). This delisting of EIKO occurred despite the fact that its original listing had nothing to do with Iran’s nuclear program, the purported reason for the nuclear deal. The Trump administration relisted EIKO pursuant to its May 2018 withdrawal from the JCPOA.

Sanctions will have a substantial impact on Khamenei’s business empire because it depends on foreign partners to acquire resources and technology. It therefore relies on the international financial system to transfer funds into and out of Iran, and on bilateral trade to exchange goods.

Following the implementation of the JCPOA, Mostazafan and South Korea’s Daewoo signed a $1.5 billion preliminary deal to build a major highway in Iran, with help from a Chinese corporation. Mostazafan subsidiary North Drilling Company also signed a memorandum of understanding with Altea Resources, a French engineering firm. EIKO-controlled Bahman Geno Co. signed a $10 billion deal to build refineries with Daewoo and Hyundai, yet there is no sign the deal is going forward since the re-listing of EIKO.

Companies within the supreme leader’s orbit also export goods while importing the materials necessary to produce goods for the Iranian market. From March 2017 to March 2018, Mostazafan-controlled firms exported close to €700 million of goods to 56 countries. The foundation estimates that these exports comprised 10 percent of the revenue it earned selling manufactured goods, suggesting total sales of close to €7 billion. EIKO and Razavi have not released similar numbers, but Razavi’s reports indicate a robust and growing export operation. For its part, EIKO owns firms in export-oriented sectors such as oil products and petrochemicals.

Khamenei’s business empire is active in the service sector, too, from telecommunications to banking and tourism. EIKO and Mostazafan have a monopoly over the telecom sector in Iran via ownership of Telecommunication Company of Iran, Mobile Telecommunication Company of Iran, and Irancell. Mostazafan owns Sina Bank, which is already under U.S. sanctions, and EIKO-controlled companies are major shareholders of the already-designated Parsian and Karafarin banks. Mostazafan and Razavi have a significant share of the tourism industry in Iran via ownership of major hotel chains.

Khamenei’s business empire also has a presence outside Iran. Mostazafan owns the Iranian Club, a luxury resort in Dubai. In 2013, Treasury sanctioned a chain of EIKO-owned companies based in the UAE, South Africa, and Germany for their role in Tehran’s proliferation network.

The next logical step toward maximum pressure on Tehran is to designate the Mostazafan Foundation and Razavi Organization, along with their subsidiaries and related entities. Together, these targets have an estimated value of at least $100 billion. Trump’s order also calls for sanctions on the executives and board members who run the supreme leader’s empire. Designating them will help prevent sanctioned entities from reemerging under new names.

Some senior Obama administration officials argue that the new sanctions are purely symbolic or outright useless. The facts show otherwise. If enforced, the new sanctions will cost Tehran billions at a time when the regime is already struggling to deal with a deep recession, spiraling inflation, a debilitated currency, and the loss of its oil exports.

Mark Dubowitz is the chief executive officer for the Foundation for Defense of Democracies, where Saeed Ghasseminejad is senior Iran and financial economics advisor. Both contribute to FDD’s Center on Economic and Financial Power (CEFP). Follow Mark on Twitter @mdubowitz and Saeed @SGhasseminejad. Follow FDD at @FDD and @FDD_CEFP. FDD is a Washington-based nonpartisan research institute focusing on national security and foreign policy.